We have reprioritised spending to be more productive: Expenditure Secretary

Expenditure Secretary T V SOMANATHAN joined his new position in the finance ministry in mid-December, as Budget preparations were in full swing. Speaking to Arup Roychoudhury in this first print interview since taking on the role, Somanathan says the government will provide more to key rural schemes like MNREGA and PM-KISAN, if needed, and that expenditure is being aimed towards sectors which will help kick-start growth and consumption. Edited excerpts:
 
How realistic do you think the overall Budget numbers are?
 
I think they’re actually extremely realistic in the sense that they are neither over-optimistic nor are they pessimistic. They actually represent a best case or a most realistic case scenario. If you look at the growth target of 10 per cent nominal GDP, what we expect is something like 6-6.5 per cent real GDP growth, and inflation of 3.5-4 per cent. But if you look at certain recent inflation retail inflation numbers, they've been higher at around 5 per cent, though WPI inflation is a little low. So I think the combination of real growth plus inflation is extremely likely to be 10 per cent or more.

 

And if you look at the overall revenue estimation, it anticipates a buoyancy of approximately 1.2. Historically, that is attainable. This year the revenue buoyancy is expected to be 0.65 but that is because you had a structural change, in the form of steep reduction in corporate tax rates. That will not happen next year so you will have a base, which is likely to grow by 10 per cent nominal in terms of economic growth. We have not attempted to be over-pessimistic or over-optimistic.
 
Has the Budget done enough? Experts and even some within the government were calling for a year-on-year fiscal expansion. You have not done that.

 
Whether it is an expansion or not also depends on the denominator. In a growing economy, 3.5 per cent is bigger than 3.8 per cent in absolute terms. So, in terms of the total, aggregate public expenditure will grow next year at more than the rate of nominal GDP growth. Aggregate expenditure is seen to be rising by more than 11 per cent. There is a much more substantial rise in capital expenditure so the capital expenditure growth is about double the overall expenditure growth.
 
So, in terms of those expenditures, which have high multipliers, and those expenditures which create good downstream effects in the economy, we have substantially increased the provisioning, even with a reduced fiscal deficit. So, it's a reprioritisation of expenditures towards high multiplier, highly productive government expenditure. Remember we also have to balance the need for stimulus, with the need for long term sustainability of our public expenditure. We do not want to get into a situation where if you look at one of the previous rounds of stimulus, we ended up with a lot of subsequent difficulties. So, we are trying to do something that is actually fiscally prudent and sustainable but it’s helping the economy to grow. So it’s a balance.

The 15th Finance Commission has pulled up the Centre for not rationalising its schemes and has said it should utilise FY21 to thoroughly assess centrally-sponsored and central-sector schemes. Will we see the government do that?

Yes. We are going to make a serious effort to rationalise centrally sponsored schemes, and it is quite independent of what the Commission has recommended. We are intending to do it anyway. We intend to do it so that we create space for higher value expenditures, and remove lower value additional spending. I do not want to pre-judge what will come out of the exercise but we do intend to do a very serious exercise.

Will the number of schemes be drastically reduced by the next Budget?
 
I don’t want to comment on what any reduction or any number will be it because in some cases what you need is not necessarily a reduction. You actually need in some cases an increase. Rationalisation works both ways. You may have a good scheme that is starved of funds, a bad scheme that needs to be cut.
 
But we intend to make a very serious effort to look at the existing structure of centrally sponsored and central sector schemes. And to rationalise them so that we can for the highest possible value addition and the schemes are operated efficiently both by centre and state.

 
You have expected to save some Rs 20,600 crore on PM-KISAN this year, if you compare Budget estimates to revised estimates. Why has Rs 75,000 crore been allocated again for FY21?
 
The increase is because we do feel that in the first year of any scheme, apart from duplication, there are issues of reach, because the scheme started quickly and it was ramped up fast. So there could be people who are left out of the system, who have not been reached in the first round because different state governments have implemented it with different degrees of administrative capability. We want to ensure that we don't under-provide, because if it is necessary, it must be there. Because it goes to the most vulnerable sections of the society. And there is a possibility that as the scheme reaches its second year, people who were left out because they didn't have the right documents or people who were not reached by the states administrations; they would get into the scheme.

 
What about NREGA? Why have you allocated less for FY21 than your revised estimates for FY20, though you ended up spending more this year?
 
MNREGA is a demand-based scheme so if the demand arises it needs to be provided. This year there was an increase in demand from certain pockets of the country. Partly, it is also related to the circumstances as this year was there was in several states, a year of exceptional weather. What we have provided is what we see as the requirement in a steady state. But if this some un-natural events occur in the coming year, then in the revised estimates, we will provide for the difference, for MNREGA and if required for PM-KISAN as well.